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Sonora Mexico Real Estate Agent - PDF

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					Arizona Journal of Real Estate & Business • (408) 946-5388 • 1-800-659-8088                   August 2002



              ARIZONA PILOTS MEXICO
               REAL ESTATE REFORM
       By Mitch Creekmore, Stewart Title Guaranty de Mexico


Americans have traditionally enjoyed going to the beach to vacation or simply to
have days of “fun in the sun.” Whether one lives on the West Coast, East Coast
or the Gulf Coast, it is just a matter of driving to your favorite spot along
America’s coastlines. Arizonans drive to their favorite beach as well, only it is south of their border.
Being a “landlocked” state creates the necessity for the populace of Arizona to explore their beach
property desires in a foreign jurisdiction unless they go to the West Coast. The Mexican state of Sonora
has long provided an attractive venue for weekend outlets of sand and sea pleasure. With only a four-hour
drive from Phoenix or Tucson to Puerto Peñasco, affectionately known as “Rocky Point,” the lure of
owning a beach house or condo has stirred many an Arizonan to take a certain leap of faith and acquire
real estate in this Sea of Cortez municipality. The biggest drawback, however, to fulfilling their vacation
home dream is not getting legal title to the property!

Mexico, over the past decade, has initiated and implemented sweeping changes to its national foreign
investment law, coupled with constitutional amendments that have revised the integrity of the nation’s
“restricted” landscape. And for one very salient reason – to promote, to enhance and to ultimately protect
the foreign investment that Mexico’s seaside communities desperately rely on in the form of tourism. As
Mexico’s third largest generator of gross domestic product, the tourism sector, with investment in real
estate along the country’s coastlines, produces jobs, infrastructure development, tax revenue and
ultimately huge income for the local market. Mexico is dependent on American and Canadian tourism in
a big way. As has been said, when the United States economy gets a cold, Mexico suffers from
pneumonia! Rocky Point, like Los Cabos, Puerto Vallarta, Cancun, Cozumel, Mazatlán, et al, is no
different.

Mexico’s real estate development laws are not unlike those of the United States. Inherent within the laws
are state and municipal regulations, procedure, formality of process and governmental approval. This is
particularly true with the state of Sonora. But who safeguards and protects a foreign buying public if the
developers, sales agents and homeowners don’t comply with government regulations and procedure?
Buyers are left to educate themselves and to seek competent legal advice to understand the intricacies of
purchasing property in Mexico. Not getting good title to real estate in Mexico is not the fault of the
government, nor is it the lack of legal structure and protocol within Mexico. The laws to protect
purchasers do exist. More times than not, it is a question of whether sellers and/or agents comply with
what is mandated to protect consumers.

Arizona Gov. Jane Hall has created the first-ever Real Estate Task Force on Mexico in participation with
Sonora Gov. Armando Lopez Nogales. The mission statement and objective of the Task Force is simply
to advise, to educate, to enhance and ultimately to protect purchasers concerning their ownership rights on
real estate in Sonora. It is no longer sufficient to discuss the problems that exist in the market on a cross-
border, bilateral basis within the respective states. Both Arizona and Sonora have taken the initiative not
only to recommend changes, but also to implement them. Comprised of real estate professionals from the
legal, brokerage, title company, appraisal, developer and government sectors, the Task Force will produce
a user-friendly buyer’s checklist accompanied with a buyer’s advisory that gives more in-depth
information on Sonoran real estate matters. The Task Force will create a seller and a developer property
disclosure form to be provided to prospective purchasers. It will also make recommendations to the
Secretary of Tourism for Sonora concerning Sonora’s newly passed real estate agent registry law and
assist with its implementation.

Enacted May 21, 2002, the law generally requires that all Sonora real estate agents register with the State
Registry of Real Estate Agents. The registry will be regulated and enforced by the Secretariat of
Economic Development and Productivity, with technical support from the Institute of Property Values
and Registries of the State of Sonora (“INCRESON”). Upon initial registration, real estate agents must
comply with the legal norms as established by the Secretariat and/or the existing laws, agree to re-register
regularly as required and to advise changes in the registry information submitted. Real estate agents will
also be required to allow permit inspectors to make onsite visits as established by regulation, and to fulfill
required continuing real estate education. The law also establishes sanctions for non-compliance and
provides that the information will be public.

During the past four years, significant strides have been made to create a heightened awareness of
consumer protection, coupled with buyer education on Mexican real estate matters. The non-Mexican
buying public is certainly a more enlightened purchaser. Disposable income and discretionary spending
concerns have given way to a “wait and see” attitude on buying a vacation or investment property. The
dynamics of a U.S. recession and the ensuing consequences of Sept. 11 have completely changed today’s
real estate climate, both in the United States and Mexico. U.S. buyers no longer accept the “that’s the way
we do business here, trust me” caveat. They simply can’t afford the risk nor should they have to.

Sonora and Puerto Peñasco, though aggressive and pro-active with the changes they have mandated, are
not unique in their efforts to implement real estate reforms. Other prominent beach markets, like Los
Cabos and Puerto Vallarta, have also made significant changes to the manner in which they disclose
information, how they handle money and escrow account considerations, and how they disclose closing
and income tax issues. Even real estate agent ethics and professionalism have been addressed. Los Cabos,
by example, has already solicited agent participation in a code of ethics and is requiring local
professionals to adhere to standards as established by the local AMPI chapter. Additionally, AMPI has
requested, stringently, that agents utilize neutral third party escrow accounts for buyer deposits and
earnest money, rather than broker accounts. Local MLS chapters meet regularly in Cabo, Vallarta,
Cancun and Nayarit to discuss the general state of the market, to share ideas and to increase the
professionalism of local agents. Let’s face it buying public, the real estate business in Mexico has
changed. If real estate developers, sellers and agents don’t protect the foreign investment available to any
given market, that money will seek another opportunity. If Mexico and the people that work there don’t
safeguard the integrity and provide security to foreign buyers, they will go elsewhere. At the end of the
day, that event benefits no one. But it is changing for the better. Let’s hope it continues.

Mitch Creekmore is the Vice President and Manager, Stewart Title Guaranty de Mexico, Houston Office,
and may be contacted at (800) 729-1900, ext. 8753 or (713) 625-8753.

				
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